Endorsement: Initiative 920 -- No

This story was published Wednesday, October 11th, 2006

Initiative 920, which would eliminate Washington's estate tax, is a fix for a problem that doesn't exist.

Family farms already are exempt from Washington's estate tax. And as it turns out, so are most other family assets.

One of two things would have to happen if this measure is approved -- either education funding would be cut about $100 million a year or the state would transfer that amount in tax savings to some of the state's wealthiest families while the rest of us paid.

Vote for this measure only if you favor one of those outcomes.

Otherwise, take our recommendation and vote against this initiative.

In all, only about 250 estates a year are subject to the state tax, leaving more than 95 percent of the remaining estates to be passed down without any liability.

Proponents of the initiative claim the tax is unfair and give it a label to match -- "death tax."

Sounds ominous, but death isn't taxed. It's inheritance that's taxed, and only when it exceeds $2 million (or $4 million for married couples).

The argument that inheritance tax is unfair because inherited money already has been taxed isn't convincing, especially since Washington doesn't tax income or capital gains.

It's not a bad trade-off for the wealthy, since the average assessment for Washington's estate tax is only 4.5 percent. The feds may take a bigger bite, but that problem needs to be addressed at a federal level.

On average, heirs who come into $2 million in assets subject to the tax still assets are left with an inheritance worth more than $1.9 million after paying the taxes due.

It's hard to see how that's a significant threat to the survival of small businesses, especially since the tax can be paid over five years, with the possibility of a five-year extension.

Proponents can name a couple of businesses that have left Washington, citing the estate tax as a reason. Coming up with a small business that has folded because of the tax has proved more difficult.

But if that were truly a problem, this initiative is a poor way of fixing it.

The measure wouldn't just eliminate the tax on a small business in danger of going under after the death of a patriarch -- if such a case exists -- but it would also give the tax breaks to heirs of billionaires who have no intention of ever running mom and pop's shop.

The business interests pushing I-920 ought to take their case to the Legislature. And if revisions to the estate tax are needed to prevent small businesses from closing, lawmakers ought to make those changes.

But eliminating the estate tax altogether is bad move for Washington.

The money is dedicated to an education fund, and eliminating it means bigger class sizes in public schools and fewer opportunities for higher education -- either that or higher taxes for everyone.

The Herald recommends voters reject Initiative 920.